—TheFunded Founder Institute is looking to expand its training camp for startup CEOs in San Diego, and eventually other cities, including Boston and Seattle (where Xconomy operates). The program, which is part-training and part-technology incubator, was launched in San Francisco earlier this year by Adeo Ressi, a founding member of TheFunded, an online community for venture-backed CEOs. Jeanine Jacobson and Cliff Currie are heading the startup of the institute in San Diego, and Currie says they plan to enroll their first class and launch the program in November.

AYTON — Algae could become more than just an unsightly presence on the surfaces of ponds and streams. The tiny plant organisms have the potential to help reduce air and water pollution and serve as an alternative source of fuel.

The University of Dayton Research Institute is testing various strains of algae to find out which ones will work best for atmospheric cleanup and biofuel uses. The researchers also are trying to find the best growing conditions and the most effective ways of “milking” the algae for oil they produce, preferably without killing the organisms in the process.

The work is being done under a two-year, $980,000 contract from the Air Force Research Laboratory at Wright-Patterson Air Force Base.

The AFRL’s goal is to reduce the Air Force’s emission of carbon pollutants.

Algae also produce oil that can be processed into biofuel suitable for use in automobiles and aircraft. The fuel-source potential of algae could benefit the civilian sector as well, said Sukh Sidhu, a researcher leading the work by UDRI’s energy and environmental engineering division.

“This could be part of the next-generation alternative fuels,” Sidhu said. “Once you produce a fuel, anybody can use it, not just a military base.” Algae feed on carbon dioxide to produce their oil, so they can be used to reduce carbon emissions that would otherwise wind up in the atmosphere as heat-trapping gas that can contribute to global warming. Sidhu said he has talked with a Dayton Power and Light Co. executive about involvement in the research.

Dayton Power and Light has made no decisions about whether to fund the algae-derived alternative energy work, company spokeswoman Lesley Sprigg said in an e-mail response to a reporter’s query.

A 2008 Ohio law requires utilities to gradually increase the amount of electricity produced from alternative sources.

Contact this reporter at (937) 225-2242 or jnolan@DaytonDailyNews.com.

(CNN) -- Three years ago many would have dismissed the notion that a significant supply of the world's automotive fuel could come from algae. But today the idea, while still an adventurous one, is getting much harder to ignore.

Making green from green: Biofuel from algae has been given a boost in investment in recent years.

Back then there were only a handful of companies seriously focused on producing algae fuel. Now there are well over 50, according to Samhitha Udupa, a research associate with Lux Research.

The number should double within the next year or two, she adds, and private investment in algae fuel ventures has at least doubled every year since 2006, a trend likely to continue.

Last month ExxonMobil-- which has been publicly skeptical of other biofuels in the past -- invested up to $600 million into a collaborative R&D program with Synthetic Genomics, a startup founded by J. Craig Venter.

Venter's previous firm, Celera Genomics, was a key player in sequencing the human genome. Synthetic Genomics is looking at, among other approaches, the use of tweaked metabolic pathways in algae to boost the plant's oil production. The startup received an earlier investment from BP a few years ago, but this one by ExxonMobil has raised eyebrows both for its size and because of the giant's track record.

"ExxonMobil has always been like the grinch that stole clean tech," says Udupa. "And then all of a sudden they're investing a lot of money in this one algae company."

The company kept enthusiasm tempered at a press call last month. "We need to be realistic," said Emil Jacobs, vice president of R&D at the oil giant's research and engineering unit. "This is not going to be easy, and there are no guarantees of success."

But after years of careful research ExxonMobil concluded that algae, among all the alternatives, has the most potential in terms of scalability and fitting into the vast infrastructure of existing refineries and filling stations. (It can also produce far more fuel per acre than palm, sugar cane, or corn.) Other big oil companies have recently invested into algae ventures as well, including Chevron and Royal Dutch Shell.

The airline industry, plagued by high jet-fuel prices, is also investing and testing, with players including Boeing, GE Aviation, Virgin Atlantic, Japan Airlines and Continental Airlines, among others. (Algae fuel has already helped power planes, cars, and other vehicles in various tests and demonstrations.)

Yet the idea isn't new. From 1978, the U.S. Department of Energy's Aquatic Species Program focused on it before closing down in 1996 in the face of persistently low petroleum prices and the relatively high cost of making algae fuel.

Making it economically competitive

Economic competitiveness remains the key challenge, and the hunt is on to find the best strains of algae for producing oil, as some are better than others. But it does appear that algae fuel, once an idea limited to mostly academic circles, will now get the kind of funding and attention that would be needed to turn it into a competitive industry.

A wide variety of approaches are being tried by different ventures to make algae fuel cost competitive -- and it's no easy task.

A startup near San Francisco called Solazyme (whose investors include Chevron) is growing algae in big dark tanks and feeding them sugar. Another in Israel called Seambiotic is growing marine microalgae using smokestack flue gas (or more specifically its carbon dioxide, which algae feed on) from a coal-burning power plant. Watch how one company in China is pursuing algae power »

NASA and Google have invested in an effort using semi-permeable membrane enclosures of sewage floating in the ocean. Only clean water leaks out, and the algae feed on the nutrients. Other methods range from growing algae in bioreactors to open ponds.

One environmental advantage of algae over other biofuel sources -- like palm for biodiesel, or sugar cane or corn for ethanol -- is it doesn't have to be grown in places that can otherwise serve for food production or endangered species habitat. This helps it skirt the "food vs. fuel" debate.

Algae can be fed sewage and carbon dioxide and grown in many places, including deserts, ponds, and oceans.

Algae fuel fits relatively easily into the vast infrastructure of refineries and distribution channels that already exists for fossil fuel. Ethanol by contrast is more corrosive and thus requires flex-fuel cars and costly system-wide modifications.

How "green" is it?

But algae fuel is not environmentally perfect. It still creates pollution when burned, like regular fuel. Its marketing as a "green" energy source rankles some environmentalists, who prefer a more profound switch to cleaner options like solar and wind. Algae fuel, they note, requires far less change from Big Oil.

"This is a nice way to say, 'Oh don't worry, you don't have to change anything -- we're just going to make a new way to make the existing system work," says Gillian Madill at Friends of the Earth.

Algae fuel does burn cleaner than fossil fuel, according to J.B. Hunt, a large U.S. trucking company that's looking to go greener. It recently tested a fuel blend containing algae fuel from a California startup called SunEco and found an 82 percent reduction in particulate emissions with no loss of power. The company says it might soon become a significant purchaser.

Huge sales of algae fuel are unlikely, though, over the next few years. ExxonMobil says its project is five or ten years away from producing large quantities of fuel.

And like forgotten startups of the dot-com boom, many ventures of this "algal bloom" will surely not survive. A high-profile one called GreenFuel Technologies -- which took the approach of pumping carbon dioxide into bioreactors -- went out of business this spring after costs and technical problems spun out of control.

But there's another way for algae companies to thrive before the industry scales up to massive fuel production, if it ever does: co-products. These include things that consumers are hardly aware of but that can be higher-value products, like excipients used in pharmaceutical products: Seambiotic make food additives in addition to biofuels; Solazyme has made nutraceuticals, additives and soaps using algae.

"The possibilities are endless," says Udupa. "I think the overall benefits of using algae technology initially will be realized through the co-products."

By contrast, the ethanol industry doesn't have a similarly wide range of fall-back alternatives, she notes. The ethanol industry in the U.S. has long been subsidized by the government, and some lawmakers are fighting to redirect that funding to next-gen biofuels instead.

Meanwhile ExxonMobil seems prepared to spend substantially more on its algae project once certain benchmarks are met. The initial $600 million would help the project get to "a certain level of completion in the work," said Jacobs in the press call last month.

But much more will be needed for final development and early commercialization, he added: "That could amount to, you know, billions of dollars after that."

That's small change for the likes of ExxonMobil, but it represents a big change for the status of algae fuel.

August 21, 2009

TERRE HAUTE —Faculty and student chemistry and applied biology researchers at Rose-Hulman Institute of Technology have successfully extracted biodiesel from algae — a significant stage in an unique project that will eventually use native algae from a campus pond to produce fuel for diesel engines to test power, torque and emissions.

The research project has been conducted this summer at Rose-Hulman Ventures through the Department of Applied Biology and Biomedical Engineering and Department of Chemistry and Biochemistry. The Quantum Development Corporation helped initiate the project with a $40,000 donation.Algae-based biodiesel has significant advantages, according to Michael Mueller, head of Rose-Hulman’s Department of Chemistry and Biochemistry. He has conducted extensive research on biodiesel during the past two summers.Fifty gallons of biodiesel can be produced per acre of soybeans once per year. Conversely, algae can be grown year round, is not a competing food source and 50 gallons of biodiesel can be obtained from 50,000 gallons of algae-rich water.“In terms of a two-foot deep pond, this would require an area half that required by soybeans and can be harvested almost daily,” Mueller cited.Algae being used by Rose-Hulman researchers have a lipid content on the order of 40 percent by weight. “We have been successful in obtaining very close to 100 percent of those lipids to make biodiesel. This is a significant achievement,” Mueller said.Future projects will involve using native algae in the pond at Rose-Hulman’s South Campus, off Indiana 46, for fuel that will be used in diesel engines tests.

Luckily, one can break them down by certain variables, which is the purpose of the scorecard below. The most important variable – the acumen of the management team – isn't included, so the "score" is largely hypothetical. But it provides an opportunity to see which companies might have the best technology.

1. What's the growing environment? Five growing environments exist. The cheapest, and the one currently employed by spirulina growers, are open racetrack ponds. 10 points. Fermentation tanks – i.e. beer kettles where algae are overstuffed with sugar – are more expensive and the only ones that require the algae get fed sugar, instead of free sunlight and carbon dioxide. But they work. 5 points.

Bioreactors and closed ponds get 1 point each. Algae can live off of sunlight and carbon dioxide, but swirling carbon dioxide isn't cheap. And getting rid of water is problematic. 2 points.

The last environment is fish. In this plan hatched by LiveFuels, algae grow in the wild – as cheap as you can get – but get converted into oil by fish, which then get pulled ashore, clubbed in the head, and squeezed for oil. We love the elegance, but not sure it if works. 1 point for now; 8 points if it works.

2. Wild, genetically optimized, or transgenic? Growing plain wild algae is extremely cheap and efficient, 10 points, assuming it works. Genetic optimization, or selective breeding, though, has become the standard and gets 5 points. Transgenic algae, or GMO algae, hold the most potential, but most believe they would need to be growing in fermentation kettles or bioreactors. Because it's still in developments stage, three points. Sapphire Energy says it can grow GMOs in ponds. Ten points when the company (or anyone else) can demonstrate it, 1 point for now.

3. Multiple strains or one? Multiple strains in a single point cost less and maximize solar radiation. Some of the companies working with cyanobacteria say they can tolerate multiple strains of algae in the same environment. So do the fish eaters. 3 points. 2 points for different species in separate environments. 1 point for monocultures.

4. How do you get rid of the water? De-watering is the usually where algae companies get de-flowered. A liter of water might contain 3 grams or less of functional algae. Shedding that water requires time and/or energy. Fermenters do not require algae so 10 points here. Biolight Harvesting (and a few others) say they can work with damp algae. 4 points. Everyone else for now: 0 points. "It is probably the biggest single challenge remaining in terms of economics," said Mike Melnick, Biolight's CEO.

5. How do you get the oil out? Everything in a living cell's nature guards against being cracked open for someone else's pleasure. Synthetic Genomics says it will genetically optimize algae so the cell wall breaks easily, allowing the oil to float to the top. 10 points if you can do it. OriginOil wants to shake it out with microwaves. 5 points. Everyone else squeezes it: 2 points.

6. Milk or kill? Some algae growers, such as Phycal, claim they don't have to kill their algae to get oil. Avoiding death is not being done so the algae can get rehabilitated and land a job in the halfway house cafeteria. Protein and other tissue can make up 70 percent of an algae. Re-growing that takes metabolic heavy lifting. Milking the same sorry organism for a few generations cuts growing cost and time. 10 points if you can do it. Everyone else: 5 points for realism.

7. How many gallons per acre? If they claim 2,000 to 5,000 gallons an acre per year, it's realistic. Seven points. 10,000 to 14,000 sounds out there but possible. 3 points. Over 14,000? Prove it. 0 points for now.

8. Food, fuel or chemicals. Five points for anyone that brings up food. Nutraceutical oils sell for far more than gas. While most companies have touted liquid fuels, a few like Genifuel say they will make natural gas.

9. Lipids or hydrocarbons? Sapphire and Biolight claim they can convert naturally occurring lipids into hydrocarbons during the growth and harvesting phase, which cuts out a step. 4 points if you can do it.

10. Any industrial partners or strategic investors: 5 points if so. Martek Biosciences, which has made food supplements for years, recently cut a fuel deal for fermentation with BP.

Score:

68 to 50: You can grow multiple strains of extremely greasy algae in open ponds that shed water and oil. You also don't exist yet.

50 to 40: Congratulations! You're in the top rank of algae companies and probably have raised money.

40 to 30: Hope exists, but a merger may await

30 to 20: Like the products you grow, you are part of the unwashed masses.

Algae research was validated and boosted this summer when two projects involving NASA Glenn Research Center and ExxonMobil Corp. were announced.

“Under a Space Act Agreement, NASA is partnering with Seambiotic USA to model growth processes for microalgae for use as aviation biofuel feedstock,” said Ami Ben-Amotz, chief scientific adviser to Israeli-based Seambiotic Ltd. “The goal of the agreement is to make use of NASA’s expertise in large-scale computational modeling and combine it with Seambiotic’s biological process modeling to make advances in biomass process cost reduction.” Seambiotic, which was founded in 2003 in Ashkelon, Israel, is scaling up a pilot process using carbon dioxide emissions from a coal power plant to cultivate algae for the nutriceutical and biofuels industries. The 5-hectare facility is expected to begin production in late 2009.

ExxonMobil announced its $600 million commitment for a comprehensive algae research program in partnership with California genetic researchers at Synthetic Genomics Inc. Under the terms of the agreement, SGI will work in a systematic approach to find, optimize and/or engineer superior strains of algae; and to define and develop the best systems for large-scale cultivation of algae and conversion into biofuels. SGI plans to build a new research facility at San Diego. ExxonMobil’s research and engineering expertise will be utilized throughout the program, from the development of systems to increase the scale of algae production to the manufacturing of finished fuels.

As milestones in the agreement are met, SGI will receive up to $300 million for the work over the next five to six years. “This agreement between SGI and EMRE represents a comprehensive, long-term research and development exploration into the most efficient and cost-effective organisms and methods to produce next generation algal biofuel,” said J. Craig Venter, founder and CEO of SGI. “We are confident that the combination of our respective expertise in science, research, engineering and scale-up should unlock the power of algae as biological energy producers in methods and scale not previously explored.”

Scientists at SGI have been working internally for several years to develop more efficient means to harvest the oils that photosynthetic algae produce. Traditionally, algae have been treated like a crop to be grown and harvested in a process that can be expensive and time consuming. One of SGI’s achievements has been in engineering algal strains that produce lipids in a continuous process and even secrete hydrocarbons directly. However, such engineered algae may ultimately not be cost effective, Venter said. “It may cost more to build bioreactors that would contain the engineered algae.” As part of the project, SGI will investigate thousands of strains, looking for desirable properties such as tolerance for high sunlight levels and concentrations as well as viral resistance. “There’s a wide range of algae in the environment and we’re finding a lot of exciting varieties,” he added.

ExxonMobil has looked at all biofuel options over the past couple of years, said Emil Jacobs, vice president of research and development at ExxonMobil, in a news conference following the announcement. The company examined the scalability, technical challenges, environmental performance and economics of several technologies, he said. “Algae biofuels rose to the top.” Jacobs added that ExxonMobil identified three needed research areas, one of which is the algae strain development SGI has been working with. The second area will be looking at the three major production systems now being considered in the emerging industry— open ponds, closed ponds and photo bioreactors. The third piece will be to develop the large, integrated systems that pull it all together. “We need improvements in all three areas,” he added. The goal will be to produce lipids as a biocrude that can be processed in existing refinery systems and distributed as a green hydrocarbon fuel in the existing transportation fuel infrastructure.

Algae as a crop is probably the only plant material that can replace petroleum-based crude oil for refining into transportation fuels, said an energy resources company CEO who envisions harvesting algae for fuel in southern Nevada.

Williams presented his business plan to the Virgin Valley Water District Board of Directors Tuesday and was investigating the project’s feasibility.

Chemtec Energy Services produces blending systems for ethanol used by major oil companies and manufactures equipment that adds injection into fuels. The company would be the flagship company in a joint venture business, Williams said.

According to Templar Energy Resources’ executive summary, prepared by Williams, algae’s oil yield in gallons per acre is between 1,200 and 10,000 gallons per acre. Corn yields 18 gallons of oil per acre, sunflowers 102 gallons per acre and palm oil 635 gallons per acre.

Thorny challenges lie in Williams’ path. According to the executive summary, significant volumes of water shall be used to grow and cool the algae in warm weather months.

“For algae production and transport it is estimated more than 20,000 acre-feet of water may be required on an annual basis.” Williams stated in the executive summary, but added, “The water reserves controlled by the company should be able to meet this demand and will be proven during Phase 1 operations.”

A bigger concern may be the amount of land needed to cultivate the fuel crop. Even though algae can be grown on non-traditional farmland, eliminating the fuel-versus-food debate, large amounts of land will be needed for algae farming. Williams is looking for private land in southern Nevada and the Arizona Strip for algae oil farming and large-scale production facilities.

Williams estimated that an area of 16,000 square miles – twice the size of Clark County – could produce enough algae oil to replace more than 60 percent of the entire U.S. petroleum crude oil requirements for transportation fuels.

Additionally, biomass from algae – less the extracted oil – may be sold as a high-value product for animal feed, pharmaceuticals and other uses, Williams said. Algae farming and oil production would employ local residents and build tax base.

Another benefit locally would be the clean agricultural water runoff, said Williams. Agricultural water not reused for algae production may be sold to municipalities or other entities.

Farms would be organized in 10-300-acre pods and would likely utilize an open-trough system design.

Council member David Bennett, Templar’s local liaison, said he met Williams this past year and was skeptical at first about the operation.

“I asked if it was viable,” Bennett said. “It would be more viable when gas is $5 a gallon versus $1 a gallon. This is a good, green viable way of producing jobs.”

“I don’t want to be in the refining business,” Williams said. “I have no plans to build a refinery in this area. This product would be tied to bio-refineries. We’d build them where people want refineries.”

Williams said he’s had conversations with people on the Arizona Strip and with the Moapa Band of Paiutes who said there might be 25,000 acres of land available for algae production.

“We’re not asking for anything at this point,” Williams said. “We’re only showing our intentions. I’m not saying we have all the water lined up. My potential partners are going to want to know where’s all the land and where’s all the water from the Arizona Strip all the way down to Las Vegas.”

He said his operation would not echo the controversy stirred by Wind River Resources’ plan to export water from Beaver Dam Wash to Mesquite because the water would be used in Arizona. Water from the operation would be a by-product Templar could sell.

“If you’re providing the water for production it would be better for us to utilize the water than let it run down the river,” said board member Bubba Smith. “What kind of water quality is going to be left after (algae oil) extraction?”

Williams said he wanted to make it clear that algae oil production “would never fly” if it was confined exclusively to the Arizona Strip. He admitted, “the marketability for algae oil is still not there, but it will be.”

Current plans call for Templar to partner with Solix Biofuels in Fort Collins, Colo., “a leader in the field of developing commercially viable algae oil technologies,” according to Templar’s executive summary.

Should everything proceed according to plan, build-out of the first algae farms would be accomplished “on a farm strategically located in the Arizona Strip on the Virgin River near the Nevada border,” stated the executive summary.

But Williams remained cautious. “We have to get answers before we ever put the first shovel into the ground,” he said. “We’re looking for a technology break-through and getting production costs down.”

Researchers will be gathering in St. Louis next week for the “Algae-to-Energy Research and Development in the South” meeting.

The Center for Evergreen Energy in conjunction with The Southern Growth Policies Board and The Southern Agriculture and Forestry Resource Alliance (SAFER) is hosting the meeting of southern algae researchers on August 26th at the Regional Chamber and Growth Association’s office in St. Louis at One Metropolitan Square, Suite 1300:

“Algae-to-Energy Research and Development in the South,” [is] a gathering of scientists and stakeholders in the southern United States who are researching effective and innovative ways to convert algae to biofuels. This gathering will be the first of several events related to algae biofuel research and development that the Center for Evergreen Energy will host.

In the midst of certain lobbyists' underhanded attempts to prevent climate change legislation, one oil giant, BP, has joined the biofuel-research-by-oil-firms club. BP recently invested $10 million in a joint project investigating new techniques for converting sugar into biodiesel.

BusinessGreen.com reports that, according to BP Biofuels Chief Executive Philip New, the project will allow BP to deliver sustainable, economic, and scalable biodiesel supplies. Granted, this could easily be "we're sustainable - really!" rhetoric, or a cursory attempt to appear environmentally concerned. After all, who really knows a corporation's true intentions? If BP is sincere, though, its research could contribute significantly to the evolution of a sustainable energy mentality. Yet could investment in biofuels by a well-known oil firm undo the economic and environmental damage of years of investing in unclean fuels? And could BP's investment be a sign that oil firms in general are starting to come around?

Last week, BP signed a partnership with Martek Biosciences Corporation, a fermentation technology firm that develops healthcare products derived from algae. Together, the companies will develop a large-scale, cost-effective project involving the use of algae to convert sugars into lipids, which can then be converted into biofuels. (Importantly, this approach is distinct from those that use algae as feedstock to create biofuel.) The project is expected to help BP reach its goal of identifying sustainable biofuels that do not draw on food crops and use bio-leftovers (e.g. sugar cane waste, energy grasses, and wood chips) for fermentation.As for true intentions, the project is, at least, not BP's first biofuel endeavor, and it is part of a greater systemic approach. (BP apparently has "other strategic choices for biofuels," according to the BusinessGreen report, and it provides solar energy to consumers. Moreover, New described the project as "part of our approach of integrating sugar cane and lingocellulosic biofuels with advanced technologies to produce products with a wide range of uses.")

Interestingly, though BP also has its own definition of sustainability: "the capacity to endure as a group" by renewing assets, creating and delivering better products and services that meet the evolving needs of society, and contributing to a sustainable environment. Vague terms, indeed. And, its stated strategy and techniques are somewhat contradictory: while it seeks to produce energy in an affordable, secure, and environmentally non-destructive way, it does so by participating "across the hydrocarbon value chain" ( "producing more fossil fuel resources" while somehow "transitioning to a low-carbon future").

In conclusion, the answers to my questions in the first paragraph are probably gray-greenish in hue. BP is not a renewable energy firm, and, as such, whatever sustainable techniques it has are invariably mixed in with unsustainable ones. And, environmentally speaking, the damage is already done. I guess the answers boil down to issues of expectations and perfectionism: how high up on the green scale does a company have to rate to get a sustainability check mark, and can we be satisfied with a "baby steps" approach to achieving sustainability? (I speculated on this topic in a previous post on Greenpeace's recognition of McDonalds' efforts to go green.)

With $10 million in funding from BP, Martek Biosciences is studying how to inexpensively develop vehicle fuel from organisms such as seaweed. (Mike Musgrove -- The Washington Post)

Now that its flagship product is in nearly every container of infant formula sold in the United States, Martek Biosciences is looking to edge its way into the gas tank.

The Columbia firm, which develops nutritional supplements for food and beverages based on the fermentation of algae, announced this month that BP has agreed to invest $10 million over a 30-month period to fund research seeking ways to inexpensively develop vehicle fuel from organisms such as seaweed.

"We believe sugar to diesel technology has the potential to deliver economic, sustainable and scaleable biodiesel supplies," BP Biofuels chief executive Philip New said in a statement. "BP is very pleased to be entering this important partnership with Martek."

For BP, the Martek partnership represents just one of many investments to develop sustainable alternative energy forms. Since 2006, BP has announced investments of more than $1.5 billion in biofuel research, and other deep-pocketed energy giants are looking into this area as well. In July, Exxon said it would invest $600 million in a similar type of algae research.

If Martek's research yields an affordable product, there eventually could be a significant financial upside for Martek -- but that's a big if, experts say.

"This is a fairly small bet [by BP] on a fairly long-shot idea, but that doesn't mean that it's not worth doing," said Tim Ramey, an analyst with D.A. Davidson & Co. who follows Martek. Because of those long odds, Ramey dubs the BP investment as a bit of "wildcatting in the fermentation vessel."

In theory, Martek President David Abramson said this week, turning algae into the type of fuel BP could use isn't a remarkable accomplishment. The larger, more important trick would be to develop a product for a price that matches or beats the cost of fuels used by vehicles today.

"This is very doable in a lab, if you don't care about the price," he said.

If Martek develops a viable product, it would receive royalty payments from BP whenever that product was sold. Regardless of whether that happens, Martek will keep any research that may prove beneficial to its growing line of food and beverage products, under the terms of its deal with BP.

Martek's annual revenue was $352 million last year, nearly 90 percent of which came from sales to baby formula manufacturers. Using algae, Martek makes DHA, an omega 3 fatty acid that has been proven to be important for brain and eye development in babies. As the only company that makes what is regarded as a "clean" DHA product -- other manufacturers offer DHA in the form of fish oil derived from tuna and salmon -- Martek's product has cornered the U.S. market. Nearly all baby formula sold in this country contains DHA produced by Martek. Outside the United States, Martek's products can be found in nearly 50 percent of the market.

In the last three years, Martek has been expanding its DHA business by striking deals with food and beverage makers such as Coca-Cola, which is offering a new type of Minute Maid juice that claims to "help nourish your brain" thanks to Martek's DHA.

As recent studies have indicated DHA may have benefits for adults as well, Martek has sought to take advantage of a larger potential market, branding its product as "Life's DHA" with a logo that all of its new partners are required to include on their packaging materials. The company is hoping that the logo will stick in the minds of consumers in the same way that computer buyers once gravitated to machines that featured "Intel Inside."

Some of Martek's patents around DHA development are set to expire next year, however, and some analysts see Martek's BP deal as a way for the company move forward into possible new businesses should fresh competition emerge on the DHA front.

"They're trying to reinvent themselves with deals like this, knowing that their main business might be changing," Ramey said.

Abramson disputes that the company has anything to worry about, patent-wise. Some patents have already expired, he said, but the process of making DHA is tricky enough that his company doesn't fear competition will descend quickly.

In any case, Martek has a library containing thousands of species of algae stored in freezers at its Columbia facility. Algae can do more than just generate DHA, and it is possible that one of the thousands of species in its collection may contain the company's next big product.

Might it be diesel fuel? Bentley Offutt, principal analyst at Offutt Securities, said investors won't know for years whether the research money was well spent.

August 20, 2009

Aurora Biofuels says it has developed a more voracious CO2-gobbling strain of algae, which produces an oil that can be converted into biofuel.

A California start-up, Aurora Biofuels, says it has cultivated algae that doubles production of biodiesel by absorbing more than twice as much carbon dioxide as conventional strains.

According to Robert Walsh, the chief executive of the company, Aurora’s breakthrough was to develop algae mutations that can ingest carbon dioxide regardless of the intensity of sunlight.

“Algae have a built-in mechanism to be effective at low light and as it gets brighter during the day their uptake of carbon dioxide levels off,” said Mr. Walsh. “We’ve been able to go in and alter strains by natural mutation to cause the algae to deal with light across the whole spectrum. The algae continue to uptake CO2 through brighter light and are more productive.”

He said Aurora has built a pilot facility “between a 7-Eleven and the beach” near Melbourne, Fla., and that for the past several months the new algae strains have been producing a gallon of biodiesel a day in an Olympic pool-sized pond.

An algae-derived substitute for gasoline is the great green hope of the nascent biofuels industry. Aurora is one of dozens of start-ups vying to bring an algae-based product to market that will be competitive with petroleum but does not take farmland out of food production, an issue that has plagued the corn ethanol industry.

But significant hurdles remain — including finding ways to profitably extract and process the oil from the algae.

Like some of its competitors, Aurora will offer power plants and other carbon emitters the opportunity to sequester their emissions by feeding carbon dioxide into ponds to stimulate the growth of algae.

Christoph Benning, a Michigan State University professor of biochemistry whose work involves algae, serves on Aurora’s scientific advisory board. He said the data Aurora has shown him confirms the company’s claims.

“They’ve proven that their proprietary strain can increase carbon sequestration and the ability of algae to utilize CO2 and grow higher biomass,” said Mr. Benning, who is compensated for his work on the Aurora advisory board.

Mr. Walsh said the challenge for Aurora is to commercialize its scientific advance. “We’ve proven we can do it at Olympic-pool size — can we do it at 50 acres? Can we maintain the costs at scale?” he said.

The company plans to have a demonstration plant capable of producing 1,000 gallons of fuel a day in operation by the second quarter of 2010. A full-scale production facility is to follow in 2011.

Aurora has raised $25 million from investors that include Oak Investment Partners, Noventi Ventures and Gabriel Venture Partners.

Mr. Walsh said that financing will be sufficient to see Aurora through the construction of the demonstration plant.

Aug. 20 (Bloomberg) -- A team led by J. Craig Venter, the scientist who headed a private effort to map the human genome in the 1990s, succeeded in morphing one kind of bacteria into another, edging closer to the creation of artificial life.

Venter and his colleagues outwitted the bacterial immune system that had stymied their previous efforts and produced a new form of bacteria “that had not previously existed,” the team reported in the journal Science. They used an ordinary yeast cell as a holding tank to alter the bacteria’s genetics.

The technology may help scientists radically modify the DNA of other existing organisms to create environmentally friendly biofuels or remove carbon from the atmosphere. Exxon Mobil Corp., the biggest U.S. oil company, said July 14 it would invest more than $600 million to make fuels from algae with Synthetic Genomics Inc., a closely held San Diego-based company founded by Venter.

“These are new variations of existing life forms and they can be very, very useful,” Eckard Wimmer, a professor of molecular genetics at Stony Brook University on Long Island, New York, said in an Aug. 18 telephone interview. “It’s a step closer to the manufacture of bacteria that could be used in biotechnology for the benefit of humankind.”

Wimmer, who created the first synthetic virus in 2002, was not involved in Venter’s experiments.

Failure to Boot

In 2008, Venter and his team reported that they had pieced together the longest segment of bacterial DNA ever replicated and inserted it into the shell of another bacterium whose own DNA had been removed. That well-publicized effort failed in one key respect, Venter said in a telephone interview yesterday: the new bacteria didn’t “boot up” and come to life.

The effort was frustrated by an important attribute of bacteria discovered by Hamilton Smith, a scientist with Venter’s nonprofit group, the J. Craig Venter Institute based in Rockville, Maryland. Smith earned the 1978 Nobel Prize for showing that bacteria have proteins called restriction enzymes that protect against invading organisms by chopping up their DNA.

“It’s like the immune system of bacteria,” Venter said in a telephone interview yesterday. “When foreign DNA comes in, they chew it up.”

When the transplanted bacteria in their previous effort failed to function, Venter’s team realized that the restriction enzymes might be interfering. By transplanting the DNA of the first bacteria, Mycoplasma mycoides, into yeast, whose genetics are easier to manipulate, they were able to modify the bacterial chromosomes in two important ways.

Brought to Life

First they changed its properties in ways that could be beneficial for creating new products. Second, they converted pieces of the bacterial DNA to keep them from being recognized and attacked by the restriction enzymes. This allowed them to transplant the modified bacterial DNA into a second bacterium and bring the new form to life.

“As soon as we put the bacterial chromosomes in yeast, they behave totally like a yeast chromosome,” allowing the team “to make numerous and rapid modifications of the bacterial chromosomes,” Venter said. “We created a new type of bacteria and it’s completely functional.”

Venter’s work in creating new life forms that never previously existed have raised concerns among some ethicists and environmental activists, who fear that new organisms could damage plant, animal or human life in ways that can’t be foreseen.

Ethics Debate Needed

“It is an untested technology, and there needs to be extensive debate about the ethics and environmental consequences of generating these new organisms,” said Alison Smith, a professor of plant sciences at the University of Cambridge in England.

Scientists haven’t yet figured out how to cultivate algae to produce a commercially viable energy source and Venter’s new findings “won’t have a direct contribution to the manipulation of algae for biofuel production,” Smith said yesterday in an e- mail. “But the technologies being developed will undoubtedly establish some generic principles that may then be employable in manipulation” of more complex organisms, including algae.

Re-engineered microorganisms may take on all sorts of jobs. For now, gene researchers are particularly excited about using energy-producing microbes as single-celled refineries for ethanol, biodiesel or other petroleum substitutes without using food crops such as corn.

Venter’s work on synthetic biology builds on the more than three decades of genetic engineering behind trailblazing biotechnology companies such as Amgen Inc., based in Thousand Oaks, California, and Roche Holding AG’s Genentech Inc. unit based in South San Francisco, California.

The Alameda, Calif.-based company has identified and optimized a genetic pathway in a species of wild algae that effectively turbocharges the growth and breeding cycle of the single-celled creature. As a result, the company says it will be able to double the oil production, and ability to sequester carbon dioxide, of its algae ponds.

"This gets us to 5,000 gallons per acre a year, which we think is economically viable," said CEO Bob Walsh in an interview.

Just as important, the algae can grow in open air racetrack ponds – arguably the cheapest environment for growing algae. The company has been breeding the strain in two ponds about the size of Olympic swimming pools in Florida and harvesting about a gallon of oil from each pond a day. Roughly half of the algae is harvested a day and the lipid, or oil, content of the algae in a normal, un-starved state is around 25 percent.

Aurora is now negotiating leases to build a 50-acre pond that could produce 100 gallons a day by the second quarter of next year. If all goes well, and further optimizations arise, Aurora could have a 2,000 acre pond by 2011 or 2012. Such a pond set up with Aurora's algae and equipment could produced lipids for around $1.75 a gallon, which would translate to $2 gallon diesel. he said.

The algae market has exploded in the past two years, growing from a handful of companies to at least 57. It sounds easier than it is. Not only has optimizing the growth of algae bedeviled researchers, scientists have struggled with devising a cheap, energy-efficient way to separate the algae from the water. A stocked pond might only contain one to three grams of harvest-able algae per liter. While some claim 50,000 gallons an acre might be possible, most algae backers talk about 2,000 to 5,000 gallons an acre per year with 8,000 to 14,000 gallons as an ideal, but distant, goal.

Some, such as Aurora and Biolight Harvesting have links with major research universities while Solazyme, Solix and Synthetic Genomics are working with large petrochemical producers. Most, however, are struggling to get much past square one. And one major one – Greenfuel Technologies – died after burning through around $70 million in money from investors.

A 2,000 acre pond would produce the metaphorical drop in the bucket for even a small trucking company. The key is that Aurora's processes can be scaled up. The rapid growth effects do not fade out in new generations and Aurora did not have to insert genes from other species to goose the growth rate.

"It won't revert in three months," he said. "A lot of times you find [genetic] improvements but they don't want to stick."

The genetic pathway is likely present in other species as well, he added.

Walsh further added that Aurora has come up with optimizations for racetrack pond designs to reduce the amount of energy required to circulate carbon dioxide in them.

"The pond itself is now cookie cutter," he said.

While Sapphire Energy says it can grow transgenic algae in open ponds, most companies are trying to avoid that tricky combination by growing their transgenic species in closed bioreactors or fermentation kettles.

Naturally, Aurora has patent applications in the works.

Although Walsh is a former Shell exec, Aurora currently does not currently have a development deal with a large oil company. The first customers will likely be carbon dioxide emitters who need to sequester their gases. Aurora will sell its oil to fuel producers at first and later explore the chemical market. These kinds of companies will likely be the ones that will pay for Aurora ponds in the future.

August 18, 2009

Congressman Edward Markey (D-Mass.), chair of the committee on Energy Independence and Global Warming and champion of the Waxman-Markey climate change bill that recently passed the House and is making its way through the Senate, has taken an interest in algae fuel. Late afternoon on Sunday, Markey got a tour of Alameda, Calif.-based Aurora Biofuels’ labs, where the startup is using biotechnology to create algae strains, which it says can produce biofuel for a low cost and with low carbon emissions. Markey told us after his tour in the lobby of the Aurora headquarters that “if properly harnessed,” algae could play a key role in fighting climate change, and that Aurora’s technology was “very exciting.”

Now, Markey isn’t exactly an algae fuel expert, so the Aurora endorsement should be taken with a grain of salt, but it shows just how prominent the fuel has become, with increasing attention from Capitol Hill. Now that the large oil firms, including both ExxonMobil and BP, have started to take algae fuel seriously (Exxon with one of the biggest algae fuel deals yet, including more than $600 million for an algae biofuels development program with Craig Venter’s Synthetic Genomics) the federal government can feel more comfortable trusting that this technology could offer promise for next-generation biofuels.

Markey’s climate change bill doesn’t necessarily have any specifics for the algae fuel crew, but the cap-and-trade portion would do more than enough by putting a price on carbon. Algae, which absorbs carbon in the growth process, could make money by recycling captured carbon, in addition to selling fuel and algae byproducts. “With a little bit of luck, we’ll pass this legislation later this year and create a marketplace” for technologies like this, Markey said.

For entrepreneurs who are toiling in the labs over algae fuel and other clean technologies, Washington, D.C., can oftentimes feel far away, in both geography and culture. When I asked Markey if he had any words for the innovators building these technologies in labs across the country, he said: “Get ready…Our legislation will unleash more than a trillion dollars’ worth of private sector investment,” which he said will create an opportunity for entrepreneurs to once again transform the world in much the same way that entrepreneurs did for the information technology boom.

With the twin goals of making fuel from algae and reducing emissions of heat-trapping gases, a start-up company co-founded by a Colorado State University professor recently introduced a strain of algae that loves carbon dioxide into a water tank next to a natural gas processing plant. The water is already green-tinged with life.

The Southern Utes, one of the nation’s wealthiest American Indian communities thanks to its energy and real-estate investments, is a major investor in the professor’s company. It hopes to gain a toehold in what tribal leaders believe could be the next billion-dollar energy boom.

But from the tribe’s perspective, the business model here is about more than business. “It’s a marriage of an older way of thinking into a modern time,” said the tribe’s chairman, Matthew J. Box, referring to the interplay of environmental consciousness and investment opportunity around algae.

The tribe, whose reservation sits atop one of the world’s richest fields of natural gas from coal-bed methane, had to surmount many hurdles to find an alternative energy idea it considered suitable.

For example, any project that would displace land used for growing food was tossed out for philosophical reasons: the Southern Utes’ belief that energy and food should not compete in a world where people still starve. That eliminated discussion of corn-based ethanol.

And whatever was chosen had to be at least technically feasible, if not immediately profitable.

The 1,400-member tribe also has a long history of herbal medicine use that made growing algae for fuel appealing, Mr. Box said. “It reminded people of herbs that are helpful here, like bear root, which is harvested in the mountains,” he said.

The Colorado State professor, Bryan Willson, who teaches mechanical engineering and is a co-founder of the three-year-old company Solix Biofuels, said working with the Southern Utes on their land afforded his company advantages that would have been impossible in mainstream corporate America. The tribe contributed almost one-third of the $20 million in capital raised by Solix, free use of land and more than $1 million in equipment.

“If you’re going with strict venture capital, they’re looking for a blistering return on capital in three to five years,” Dr. Willson said. “The Utes have a very long economic view. They’re making decisions now for future generations as opposed to the next quarter, and that is just fundamentally different.”

But the tale of any start-up is written between the margins of inspiration and hard-edged reality.

More than 200 other companies are also trying to find a cost-effective, scalable way to achieve the same end — turning algae into vegetable oil fuel, according to the National Renewable Energy Laboratory, a federal research center in Golden, Colo. Just last month, Exxon said it planned to throw $600 million into its own algae project, dwarfing Solix’s financial base about fiftyfold. Like most oil-to-fuel efforts, the Solix project focuses on making biodiesel, which can be used in a regular diesel engine.

“This is still a very young industry, with a lot of claims out there that are sometimes difficult to believe,” said Al Darzins, a group manager at the lab’s National Bioenergy Center.

Mr. Darzins said Solix’s model was different from most: the algae is grown in closed bags, lined up vertically in the water tanks, with the intent of increasing yield. But for every hopeful, he said, the crux will be controlling costs.

“Solix has an interesting idea; whether it will work, I don’t know,” Mr. Darzins said. “It’s all going to come down to the economics.”

Solix’s facility project is next to the natural gas processing plant for access to the carbon dioxide waste stream, which will be used to nourish the algae — a kind of biological recycling of carbon dioxide before its discharge into the atmosphere as the vegetable fuel is burned.

The plant also produces waste heat, which could be used to warm the algae beds in winter. In addition, the high desert plateau of southwest Colorado is one of the sunniest spots in the nation, providing solar radiation that accelerates algae growth.

Central to Solix’s business model, Dr. Willson said, is the hope that power plants and other factories now venting carbon dioxide will allow the company to build an algae farm next to their carbon dioxide vent pipes. A plant could sell the oil or biodiesel, and Solix would earn its return by being a part owner-operator, or by licensing the technology.

If Solix can expand its operations to a commercial scale, the Southern Utes will have certain first ownership and operating rights in Solix plants throughout much of the Western United States.

Karl Jacob, the director of public finance in state and local government ratings at the credit rating agency Standard & Poor’s, tracks Native American economics and has assigned the Southern Utes’ debt a AAA rating, the agency’s highest. Mr. Jacob said the tribe had proved a canny investor by doing its homework and not moving too fast.

It operates businesses in 14 states, owns office towers and land from Denver to Oceanside, Calif., and controls a company that processes about 1 percent of the nation’s natural gas. But it has only about $69 million in debt according to S.&P. Compared with most companies, that is a tiny debt-to-asset ratio.

“They have always been very prudent,” Mr. Jacob said, “looking out into the next generation.”

That green, slimy scum that makes swimmers and pool owners cringe may soon grow the High Desert into a hotbed for algae-based biofuel production.

The algae technology can be used to treat wastewater, power military tanks, trucks and planes, clean the air, fertilize the soil — and eventually keep more money in residents’ pockets.

With ample sunlight, open land and a willing workforce, the High Desert is home to a number of emerging pilot projects.

The Victor Valley’s first project is in the works at Victor Valley Wastewater Reclamation Authority, where the algae could potentially kill two birds with one stone.

“We’re beyond the if question,” VVWRA General Manager Logan Olds said. “The stage we’re at now is how.”

With electricity accounting for more than $600,000 of the agency’s annual budget — a figure that’s expected to double in the next five years — officials said using algae to generate fuel will lower the cost of the plant’s operations.

“That would benefit businesses and families in the High Desert, who would see their sewer bills reduce,” said 1st District Supervisor Brad Mitzelfelt, also a VVWRA commissioner who’s helping to launch the program.

And since algae feeds off of leftover nitrates and phosphorus, the process could also improve Victor Valley’s groundwater supply and help VVWRA meet state mandates for reducing these contaminants.

The agency’s north percolation ponds, where treated wastewater is released and allowed to filter through the sand back into the groundwater supply, already grow algae inside of them naturally.

Olds said they’ll almost certainly weed this algae out and introduce a species that’s found to be the most efficient and productive.

After a careful process to harvest and cultivate the algae, it is put into a reactor where its oil is squeezed out and converted into fuel. That biofuel can then be burned in regular internal combustion engines to create power.

Olds doesn’t have estimates yet for just how much electricity — and ultimately money — the agency will be able to save quite yet, until he settles on a final implementation plan. And that’s where his trip this week to Virginia comes in, to meet with renowned algae harvesting expert Dr. Patrick Hatcher.

“There is a big race nationally to see who can do this on a large scale,” Hatcher said in a phone interview Friday, with universities and private companies experimenting with different ways to culture, harvest and convert the algae into biodiesel.

As a professor at Old Dominion University, Hatcher is overseeing a 1-acre algae farm that’s producing enough biofuel to run an on-site generator and a fertilizer (from what’s left of the algae after the oil’s been drawn out) that yields three times more tomatoes than any Miracle Grow he’s seen.

Olds plans to sign a Memorandum of Understanding with Hatcher this week, so that the two can work together to implement technology the Virginia professor’s team has been perfecting, train his staff and get the project going.

“Ideally this is something I would hope we would be able to pursue and have in place by next summer,” Olds said.

Ultimately Olds said the biofuel project probably has more potential for benefiting private industry in the High Desert, since public agencies are limited in their use of public dollars.

Exxon Mobil, for example, recently chose to commit up to $600 million of its capital to try out an algae-based biofuel project.

The biggest roadblocks to large-scale renewable energy projects may be the start-up costs and getting firms to commit to research and development. Oil and natural gas are uncertain markets, so businesses and development firms may need incentives to move forward, Mitzelfelt said.

The good news: There’s a large amount of state and federal funds up for grabs for renewable energy efforts.

The California Energy Commission has pledged $120 million in grants each of the next to years, and another $23 million is available in federal stimulus funds for green energy job training, Mitzelfelt said.

Mitzelfelt’s office and VVWRA are also working with Victor Valley College and the county Workforce Investment Board to create a new program where students can become technicians working on projects like algae production.

“On many levels it’s a great technology,” Mitzelfelt said, “and it has the potential to create jobs for our region.”

Brooke Edwards may be reached at 955-5358 or at bedwards@VVDailyPress.com.

The consortium has pioneered an algae-to-biodiesel conversion system in which algae strip nitrogen and other potential pollutants from effluent as they grow. Harvested algae are converted by means of a proprietary chemical process into a biodiesel fuel that's more environmentally friendly than petroleum diesel.

Why algae?

The primitive, chlorophyll-containing organisms are among the fastest-growing plants in the world, and some common strains are potentially capable of producing more fuel per acre than any other biomass.

Algae also can be grown and processed in Virginia, and the fuel produced would provide jobs and create wealth at home. It also would reduce dependence on foreign oil and the cost of shipping it great distances.

Biodiesel created from algae burns cleaner than petroleum and coal products, and the complete cycle is carbon neutral. Algae also can be grown in waste and runoff water, thereby removing the nutrients that damage rivers and the Chesapeake Bay.

Monday's program is being sponsored by UMW's Earth and Environmental Sciences Department and Biology Department.

Hatcher, who also is an Old Dominion University professor of chemistry and biochemistry, will also discuss selection and growth of algae in aquaculture, harvesting, removal of oils, and conversion to biodiesel fuel. There will be time for a question-and-answer session.

To see more of The Free Lance-Star or to subscribe to the newspaper, go tohttp://fredericksburg.com/flshome. Copyright (c) 2009, The Free Lance-Star,Fredericksburg, Va. Distributed by McClatchy-Tribune Information Services. Forreprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or847-635-6550, send a fax to 847-635-6968, or write to The Permissions GroupInc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

NEW YORK (Reuters) - PetroAlgae Inc, a company that hopes to make oil from algae and other aquatic microorganisms, will see initial revenues later this year as a consortium of Chinese interests pays for the company's first license agreement, its director said.

"We expect that contract will soon start cash flow," PetroAlgae director and chairman John Scott said in an interview. The company expects to sign other license deals this year, he said.

PetroAlgae does not make fuel from algae, but sells licenses -- blueprints for how to make oil from algae, one of the oldest life forms on the planet. PetroAlgae says its process of maximizing the flow of light to organisms pushes algae to grow between two to three times faster than it would in its natural state.

The licenses also show buyers how to make protein from algae into animal feed or a human nutrition supplement. The company says selling the protein will offset infrastructure costs and help the fuel be competitive with the price of crude oil at current prices and even lower.

The company is in talks with several national oil companies, mostly from Latin America and Asia, some power generators and agricultural companies, Scott said.

PetroAlgae's stock price spiked from $8 to over $32 and down again recently after oil major Exxon Mobil signed a $600 million research and development deal with a competing algae company last month.

Companies are racing to make fuel from algae as the U.S. government threatens to crack down on carbon dioxide emissions blamed for global warming. While burning petroleum emits carbon that has been trapped underground for millions of years, biofuels emit carbon from plants that have recycled it from the air.

BROADEN THE BASE

Few investors can take advantage of PetroAlgae's price swings because several funds owned by two brothers own a huge chunk of the company.

Scott said PetroAlgae hopes to broaden its share base, but not immediately. "Over the long haul we want to increase the float and broaden the share ownership in good time," he said. "We want to make sure when we do that, we've got the goods," he said.

The company has pilot plants in Florida, but its fuel is not in wide commercial production yet.

Scott said broadening ownership of the funds would make the company "look more like a normal, real functioning public company."

He declined to say how much PetroAlgae got for the license deal to the Chinese consortium.

That group plans to build 10 5,000-hectare sites to make the algae fuel, which could cost up to several hundred million dollars each to build, a source close to the company said.

Originally PetroAlgae started trying to make oil from only algae, but has recently worked with 150 species of aquatic microorganisms, including diatoms.

Scott said such "microcrops," which can be grown in water that can be recycled, can grow 15 times more biomass per acre than traditional sources of biofuels, such as corn.

Several Arizona startup companies that rely on grants from Science Foundation Arizona say they may lay off workers and halt research after the Legislature's decision to slash the foundation's funding.

Science Foundation Arizona committed millions of dollars to private companies and university researchers over several years to encourage the state's efforts to foster research jobs and new technology. But the Legislature cut the group's funding this year as it sought to close the state's $1 billion-plus budget gap.

The result: Startup companies that secured foundation grants to create jobs in sectors such as renewable energy and biotechnology have stalled because they are no longer getting the promised grant money.

Foundation backers warn that the Legislature's funding cuts put at risk efforts to advance research in key technology sectors that can produce high-paying jobs for the state.

"Science Foundation Arizona was really one of the brightest things we were doing in this state for economic development," said Mary Poulton, who heads the University of Arizona's department of mining and geological engineering. "If we don't do something for economic development for this state, we will have a very hard time simply budget-cutting or taxing our way to a healthy economy."

Science Foundation Arizona, a private non-profit group, was formed in 2006 with the goal of pooling public and private dollars to spur research, technology, and science and math education in Arizona. In 2007, the Legislature committed $100 million over four years to the state's 21st Century Fund, a legislative entity created to fund the foundation. In order to secure the state funds, the foundation was required to match the public money with private donations.

Foundation officials said the private sector has held up its end of the bargain, with three business groups footing the bill for the group's operating costs and private donors kicking $25 million each year to match the state's contribution.

The foundation filed a lawsuit that accused the state of reneging on its contracts. A Maricopa County Superior Court judge in June issued an $18.5 million judgment against the state on behalf of the foundation, but the judge also ruled that the court does not have the power to order Arizona to satisfy the judgment.

The Arizona Department of Administration also says the foundation is owed the payments for work done in 2007 and this year.

Foundation representatives have met with Gov. Jan Brewer and legislative leaders in an unsuccessful effort to get the money that had been promised.

"The grants are seriously past due," said Don Budinger, foundation chairman. "The funds have to be restored and be paid. If they are not, the state is in violation of its agreement."

Brewer has grappled with the Legislature for two months over the state's fiscal 2010 budget. The two sides have not yet reached an agreement.

A Brewer spokesman did not provide a timetable for when the governor may address the foundation's funding situation.

"The governor is very aware of the effectiveness of the program and is carefully reviewing Judge (John) Buttrick's ruling," Paul Senseman said.

Arizona Rep. Sam Crump, R-Anthem, led a handful of Republican lawmakers in the charge to gut the foundation's funding. Crump, who did not return calls, said at the time that he philosophically disagreed with funding the foundation because it favored some industries over others.

As the foundation continues to press for money it feels the state owes it, the companies and university researchers that depend on grants from the foundation are quickly running out of cash.

"We're really sweating this," said Ray Woosley, president and chief executive officer of Tucson-based Critical Path Institute, or C-Path. "How do we keep our employees knowing that come January 1, we may no longer have funding?"

The foundation awarded C-Path $8 million over four years to accelerate the group's efforts to ease the regulatory process for pharmaceutical companies. C-Path works as a mediator between drug companies and the Food and Drug Administration to reduce bureaucratic hurdles and improve drug safety and effectiveness.

The non-profit group hired a staff of 24 employees in Tucson, in part, based on the foundation's grant. Now with its funding in doubt, some employees are beginning to look for jobs elsewhere, Woosley said.

"If we lose this (grant), we lose momentum," Woosley said. "The Food and Drug Administration can't count on us to bring companies together, and the whole idea will be lost."

Other ventures that are in jeopardy include an Arizona State University-led research project that seeks to convert algae to jet fuel. ASU scientists have proved that the technology works in the lab. Now, they are growing algae in tubes at ASU's Polytechnic campus for a pilot program to supply biofuel for a yet-to-be-named commercial airline.

If the experiment proves successful, it could reap lucrative investments and a larger commercial venture down the road.

A private company, Heliae Development, has invested $1.5 million in the project, and the foundation pledged $1.5 million to match the private investors. But the foundation does not have the money to make good on its earlier pledge, and the project may soon grind to a halt.

"We're very close to running out of funds," said Rick Shangraw, ASU's vice president for research and economic affairs.

Even more frustrating, Shangraw said, is that similar biofuel projects in other states have secured major investments as the ASU project stalls. Last month, Exxon Mobil said it would invest $300 million in a San Diego-area biotechnology company to convert algae to gasoline.

Shangraw said Arizona has the potential to become a major source of renewable energy from algae and solar, but it requires government funding to grow the burgeoning industries.

Another venture, the Arizona Institute for Mineral Resources, may scale back work on long-term research projects to save cash. That means research projects that focus on water resources, renewable energy and community health will be jeopardized, Poulton said.

William Harris, Science Foundation Arizona president and chief executive officer, said these projects and others were chosen because they had the best chance to develop new technology, jobs and federal grants that could benefit the state's long-term economy.

But if the state does not live up to its commitment, Harris said, private companies may be reluctant to spend money on future research here.

"This is more about trust," Harris said. "Will a company believe they can trust doing research and development in this state? That is key for technology jobs."

August 16, 2009

It’s been a few years since the race to make biofuel from algae really heated up. Today more than 50 companies are trying to find a way to affordably squeeze oil from slime, and it seems like the golden age for these tiny autotrophs.

However, the hurdles to reach commercial production of algae-oil might be too great for many of these ventures. This spring a pioneer company, GreenFuel, shut down operations after running out of money while trying to make a commercially viable process. Even stranger, another promising startup called Livefuels has just announced that it is making a bizarre change in its method. Instead of continuing to develop efficient ways to extract oil from algae, Livefuels is now going to feed their algae to fish and then squeeze the fish to get the oil.

That’s right... Squeeze the fish.

It’s unclear how much more efficient it might be to produce oil from fish who eat algae than from algae itself. But the fish bypass some of the high costs of algae biofuel: the equipment and energy needed to filter algae from the water and squish out the oil. At the same time, you don’t have the luxury of reusing your fish. (Algae can be “milked” more than once.) The fish and “other aquatic herbivores” used by Livefuel will likely have to die.

Meanwhile, the field of algae fuels has high goals, few operations are actually producing any results. Solix, a company Popsci profiled in 2007, reported producing algae oil at about $33 a gallon, which very well might be the best possible right now. The newest venture on the block — a collaboration between Exxon Mobil and geneticist J. Craig Venter — has admitted that commercial viability is at least five to ten years off.

All said and done, the Exxon-Venter project and others suggest that with sufficient time and development, oil from algae should eventually be affordable.

Though if Livefuel is seriously moving into the fish-squeezing market at this point in the game, it can’t bode well for vegetarians.

“We cook ‘em and squeeze ‘em.” That’s how LiveFuels CEO Lissa Morgenthaler-Jones describes her San Carlos, Calif.-based company’s process for turning algae-fed fish into oil for fuel using heat and high pressure. It’s a slightly more gruesome way of harvesting pond scum than the mechanical equipment employed by other startups working on algal fuels, but it might be cheaper.

According to a spokesman for LiveFuels, which was founded in 2006 and announced the kickoff of pilot operations at a 45-acre open pond test facility in Brownsville, Texas, this week, “It’s still being determined just how much less expensive the LiveFuels natural systems process will be compared to traditional mechanical processes, but we do know that current mono-culture process for developing algae require over $1 worth of nutrients…just to grow the algae for one gallon of fuel.” That dollar-per-gallon, he said, doesn’t take into account the cost of energy needed to pump thousands of gallons of water in the production process for every gallon of fuel. LiveFuels aims to cut costs by using grazing minnow-sized fish and “a variety of other aquatic herbivores” to harvest algae fertilized by agricultural runoff, and let “ocean currents do its ‘pumping’ for it.” It then plans to make fish meal from the protein solids, and process the remaining oils into either high-value omega-3 oils or fuel.

This process is not without critics who have environmental and ethical objections to raising animals for fuel. LiveFuels also faces technical challenges, such as how to make the system efficient enough to make up for the likelihood that the fish will have to eat more algae than the company would have to harvest directly for the same amount of fuel, notes Greentech Media.

Some investors, however, think LiveFuels has a good shot at making the technology and economics work. The company raised $10 million in May 2007 from David Gelbaum’s quiet Quercus Trust. At the time, LiveFuels reportedly hoped to have its biofuel ready for launch by 2010. At this point, however, the company is still trying to bring down costs, NYT’s Green Inc. reports, and will spend a good portion of what’s left of that $10 million on additional research and development. As a startup in this early stage — with a ticking clock and competition from well-funded heavy hitters like Algenol Biofuels, Synthetic Genomics and Sapphire Energy — LiveFuels is definitely a little fish in a big pond.

Green Plains Renewable Energy provided some green shoots fodder for the ethanol industry to nibble on this week. The No. 4 ethanol producer in the U.S. posted a profitable second quarter, two plants purchased last spring are now on line and execs with the company noted slightly improving margins in the third quarter. Green Plains also is expected to begin producing algae by the end of September as part of the BioProcessAlgae project.

Green Plains net income was $627,000 in the second-quarter compared to a loss of $1.2 million in the same period last year. The company’s ethanol production segment generated $2.6 million in operating income and experienced an improvement in its margins, CEO Todd Becker said during a conference call with investors.

Becker said he was encouraged by growing demand for ethanol and the renewable fuels mandate, which requires an increase to 12 billion gallons of ethanol in 2010.

“Currently supply and demand is close to equilibrium,” Becker told investors this week. “With a 1.5 billion gallon increase in demand coming we are optimistic it will stay that way.”

The ethanol industry still faces a number of challenges. It is still difficult to secure any kind of financing, and overall demand for gasoline is fairly stagnant. And its future is tied in large part to whether the Environmental Protection Agency increases the ethanol-blend limit to 15 percent. POET CEO Jeff Broin argues that without the increased blend wall, development of second-generation biofuels will come to a halt.

What’s interesting about Green Plains is that it’s growing while much of the industry is still struggling. And that’s hardly something to scoff at considering at least 10 ethanol producers have filed for bankruptcy protection in the past year. Meanwhile, Green Plains has grown from a single 55-million gallon plant to six plants capable of producing 480 million gallons of fuel grade ethanol.

Green Plains produced 77 million gallons of ethanol in the second quarter. That number is expected to reach 100 million gallons in third quarter with the addition of its two recently purchased plants in Nebraska, Becker told investors this week.

A number of companies have delved into the algae business in the past several months. But Green Plains’ BioProcessAlgae project is interesting because of its focus on carbon sequestration along with advanced biofuels production capability. Using algae to for carbon sequestration may help ethanol producers clear the EPA’s proposed biofuel regulations.

Ethanol producers would have to meet tougher lifecycle assessments for greenhouse gas emissions, under the proposed rules. The rules are controversial because of the so-called indirect land-use impact, which measures emissions generated when agriculture land in the U.S. shifts to the production of ethanol and in turn, causes farmers in other parts of the world to clear forests to for food production. The EPA recently conducted a peer review of the rules.

Corn-based ethanol must emit 20 percent less greenhouse gas than gasoline. Under the proposed rules it would fail to meet those standards. Granted, current corn-based ethanol producers would likely be grandfathered in under the rules. I expect scrutiny of corn-based ethanol will only get harsher and tighter rules may come down the line eventually, which makes Green Plains’ algae project a worthwhile experiment.